JOINT, COMMON, OR COMMUNITY OWNERSHIP

JOINT, COMMON, OR COMMUNITY OWNERSHIP

Joint, common, or community ownership or co-ownership means simultaneous ownership of a given piece of
property by several persons (two or more). See Civil Code Section 682. The types of such ownership interests
include the following:

Tenancy in Common

Tenancy in common exists when several (two or more) persons are owners of undivided interests in the title to
real property. It is created if an instrument conveying an interest in real property to two or more persons does
not specify that the interest is acquired by them in joint tenancy, in partnership, or as community property.
Some instruments of transfer/deeds of conveyance clearly state the intentions of the persons acquiring are to
hold title as tenants in common. See Civil Code Section 685.

Example: Interests of such tenants in common may be any fraction of the whole. One party may own one-tenth,
another three-tenths, and a third party may own the remaining six-tenths. If the deed to cotenants does not recite
their respective interests, the interests will be presumed to be equal.

There is a unity of possession in tenancy in common. This means each owner has a right to possession and none
can exclude the others nor claim any specific portion for him or herself alone. It follows that no tenant in
common can be charged rent for the use of the land/property, unless otherwise agreed to by all the cotenants.
On the other hand a tenant in common who receives rent for the premises/property from a third party, must
divide such profits with the other tenants in common in proportion to the shares owned. Similarly, payments
made by one tenant in common for the benefit of all may normally be recovered on a proportionate basis from
each. These might include, among others, moneys spent for necessary repairs, taxes, and interest and principal
payments under a deed of trust.

Subject to applicable federal and state law, a tenant in common is free to sell, transfer or otherwise convey, or
mortgage the tenant’s own interest as he or she sees fit. The new owner becomes a tenant in common with the
others. Few lenders are willing to extend credit to be secured by a mortgage or deed of trust against only the
interest of a single tenant in common. In the event of a foreclosure of their mortgage encumbrance/lien, lenders
typically do not want to end up as co-owner with other tenants in common. Because of the practical difficulties
involved in selling, transferring or otherwise conveying, or mortgaging the interest of a single tenant in
common, the tenant may be limited in his/her effort to liquidate the single interest to forcing a sale of the entire
property by filing an action before a court of competent jurisdiction known as a “partition action.”

No right of survivorship exists for individual tenants when title is held as tenants in common. The undivided
interest of a deceased tenant in common passes to the beneficiaries (heirs or devisees) of the estate subject to

probate, pursuant to the last will and testament of the deceased or by intestate succession. The heirs or devisees
of the deceased simply take the tenant’s place among the other owners who continue to hold title to the property
as tenants in common. See Probate Code Section 6400 et seq.

Joint Tenancy

Joint tenancy exists if two or more persons are joint and equal owners of the same undivided interest in real
property. Generally, to establish a joint tenancy a fourfold unity must exist: interest, title, time, and possession.
Joint tenants have the same interest, acquired by the same conveyance, commencing at the same time, and held
by the same possession. See Civil Code Section 683.

The most important characteristic of a joint tenancy is the right of survivorship that flows from the unity of
interest. If one joint tenant dies, the surviving joint tenant (or tenants) become(s) the owner(s) of the property to
the exclusion of the heirs or devisees of the deceased. Thus, joint tenancy property cannot be disposed of by the
last will and testament, is not subject to intestate succession, and typically does not become part of the estate of
a joint tenant subject to probate.

Further, the surviving joint tenant(s) is/are not liable to creditors of the deceased who only hold existing
encumbrances/liens on the joint tenancy property. The words “with the right of survivorship” are not necessary
for a valid joint tenancy deed, although they are often inserted. To perfect the ownership interests of the
surviving joint tenants, severance of the joint tenancy of the deceased is to be accomplished and evidenced in
the public record.

The creditors of a living joint tenant (as distinct form a deceased joint tenant) may proceed against the interest
of that tenant and force an execution sale. This would sever the joint tenancy and leave title in the execution
purchaser and the other joint tenant as tenants in common.

Creating A Joint Tenancy. With limited exception, California appellate courts have accepted and enforced the
common law rule that if any one of the four unities — time, title, interest or possession — is lacking, a tenancy
in common, not a joint tenancy, exists. An exception to the general rule has been more recently applied in
connection with the time of acquisition of the title to the property. Consultation with knowledgeable legal
counsel is recommended to answer questions that may be posed by property owners regarding the establishment
of joint tenancies and the legal, practical, tax, estate planning, and other considerations involved.

However, by statute a joint tenancy may be created:

1. By transfer from a sole owner to himself or herself and others as joint tenants.

2. By transfer from tenants in common to themselves or to themselves, or any of them, and others as joint
tenants.

3. By transfer from joint tenants to themselves, or to any of them, or to others as joint tenants.

4. By transfer from a husband and wife (when holding title as community property or otherwise) to
themselves, or to themselves and others, or to one of them and to another or others as joint tenants.

5. By transfer to executors of an estate or trustees of a trust as joint tenants.

See Civil Code Section 683.

Severance. A joint tenant may sever the joint tenancy as to his or her own interest by a conveyance to a third
party, or to a cotenant. If there are three or more joint tenants, the joint tenancy is severed as to the interest
conveyed but continues as between the other joint tenants as to the remaining interests. If title is in A, B and C
as joint tenants, and A conveys to D, then B and C continue as joint tenants as to a two-thirds interest and D
owns a one-third interest, as tenant in common. If A and B only are joint tenants and B conveys to C, then A
and C would be in title as tenants in common. See Civil Code Section 683.2

Another method is a partition action by the joint tenants. If the partition cannot be made without prejudice to
the owners, a court may order the property sold and the division of the proceeds of the sale distributed ratably
to the owners. In some circumstances, a severance will not terminate the right of survivorship interest of the
other joint tenants in the severing joint tenant’s interest. Nor, under the circumstances set out in Civil Code

Section 683.2, may a severance contrary to a written agreement of the joint tenants defeat the rights of a
purchaser or encumbrancer for value and in good faith and without knowledge of the written agreement.

On death of a joint tenant, the joint tenancy is automatically terminated. Nevertheless, for record title purposes,
the following must be recorded in the county where the property is located:

• A certified copy of a court decree determining the fact of death and describing the property; or

• A certified copy of the death certificate or equivalent, or court decree determining the fact of death, or

letters testamentary or of administration or a court decree of distribution in probate proceedings. With
each of these alternatives, it is customary to attach an affidavit that identifies the deceased as one of
the joint tenants of the property.

Some of the Pros and Cons of Joint Tenancy. On the plus side, the major advantage of joint tenancy is the
comparative simplicity of vesting title in the surviving joint tenant (or joint tenants). The marketable title delay
arising from probate proceedings in the form of a stay for as much as six months (or even longer) is avoided.
Although certain legal costs are ultimately involved in terminating the joint tenancy, the customary
commissions and fees payable to executors or administrators and to their attorneys may become unnecessary.

As previously mentioned, a further advantage of joint tenancy is that the survivor holds the property free from
debts of the deceased tenant and from liens against the deceased tenant’s interest. This can work an injustice to
creditors, but a diligent creditor can usually take appropriate precautionary steps to avoid such loss, or may
have access to other assets of the decedent. On the other hand, in many situations joint tenancy is a pitfall for
the uniformed or unwary.

The supposed advantages may be imaginary. A joint tenant may not want the other (surviving) joint tenant to
get the title free and clear; the likely saving of probate fees is at least partly offset by costs of terminating the
joint tenancy, and may be completely offset by added taxes. The probate delay is not unreasonably long, and
there may be no creditors of the estate. Moreover, the joint tenant gives up the right to dispose of his or her
interest by a last will and testament.

Giving advice about the way to hold title to real property is ill advised and considered the unauthorized practice
of law when offered by persons who are not members of the State Bar of California. As previously mentioned,
significant legal, practical, tax, estate planning, and other issues and consequences may result from holding title
in one form or another. The advice of knowledgeable legal counsel and other appropriate professionals is
strongly recommended before selecting the form of ownership of the title to real property

Community Property

Community property generally consists of all property acquired by a husband and wife, or either, during a valid
marriage, other than separate property acquired prior to the marriage, by gift, or as an individual heir or devisee
of a deceased. Separate property may also include the fruits falling from the previously described tree of
categories of separate property, as well as property designated as separate by the husband or wife or by court
order. Separate property of either the husband or the wife is not community property.

Separate property of a married person includes:

1. All property owned before marriage.

2. All property acquired during marriage by gift or inheritance.

3. All rents, issues and profits of separate property, as well as other property acquired with the proceeds from
sale of separate property. For instance, if a wife owned a duplex prior to marriage, the rents from the
duplex would remain her separate property. If she sold the duplex and bought common stock, the stock and
dividends would be her separate property. It would have to be clearly and unequivocally identifiable as
separate property, and separate records should be maintained to make certain any separate property is not
commingled in any way with the community property. Very often husband and wife deliberately may allow
their separate property to merge with community property in keeping with their intentions or with their
conduct and actions.

4. Earnings and accumulations of a spouse while living separate and apart from the other spouse.

5. Earnings and accumulations of each party after a court decree of separate maintenance.

6. Property conveyed by either spouse to the other with the intent of making it the grantee’s separate property.

It should be recalled that a husband and wife often hold property as joint tenants. Yet, even when title is held in
joint tenancy, it is possible (e.g., by separate written agreement) to own the assets as community property. The
record title may not be controlling in light of off-record agreements showing other intentions of the parties. For
example, joint tenancy property owned by married persons may, in fact, be considered separate property. See
Civil Code Sections 682.1 and 687 and the Family Code under Part 1 and 2, Division 4, commencing with
Section 720.

Management and control. Each spouse has equal management and control of community property. An
exception exists if one of the spouses manages a community personal property business. That spouse generally
has sole management and control of that business. Community property is liable for the debts of either spouse
contracted after marriage. Community property is liable for a debt contracted prior to marriage, except that
portion of the community property comprised of the earnings of the other spouse.

Neither spouse may make a gift of community property without the consent of the other. Neither spouse may
encumber personal property such as the furniture, furnishings, or fittings of the home, or the clothing of the
other spouse or minor children without the written consent of the other spouse. However, each must join in the
sale/transfer or conveyance, or the encumbrancing or leasing of community real property.

If real property is owned by several (two or more) persons, real estate licensees should obtain the necessary
signatures of each person in title to listing agreements and to purchase and sale agreements, whether for the
purpose of countering or accepting offers from the intended buyer/purchaser.

Each spouse has the right to dispose of his or her half of community property by will. Absent a will, title to the
decedent’s half of the community property passes to the surviving spouse. See the Family Code under Part 4,
Division 4, commencing with Section 1100.

Joint tenancy and community property. Considerable confusion surrounds the status of some family homes
in California, since the husband and wife may acquire their home with community funds but proceed (as
previously mentioned) to take record title “as joint tenants.” It is not generally understood that some of the
consequences of holding title in joint tenancy are entirely different from the consequences of holding title as
community property.

As previously mentioned, California courts are aware of this problem and have established the rule that the true
intention of husband and wife as to the status of their property shall prevail over the record title. Ambiguity
results from the specific circumstance of having the record title in joint tenancy while the true character of the
property, as intended by the husband and wife, is community property. This transition might be accomplished
by appropriate agreement in writing, or even by a deed from themselves “as joint tenants” to themselves “as
community property.”

Among themselves, the rights and duties of joint tenants are generally the same as among tenants in common,
with the vital exception of the rule of survivorship. As previously discussed, a joint tenant may borrow money
and, as security for the repayment of the debt, execute a mortgage or deed of trust on his/her interest just as a
tenant in common may. This does not destroy the joint tenancy, but if the borrower should default, and the
mortgage or deed of trust should be foreclosed while the borrower is still alive, the joint tenancy would be
ended (a severance) and a tenancy in common created. As previously noted, most lenders would hesitate to
make such a loan.

Should the borrower/trustor/mortgagor die before the mortgage is paid off or foreclosed, the surviving joint
tenant gets title free and clear of the mortgage executed by the deceased joint tenant. When title is held as
community property, no separate interest exists for the purpose of encumbering through a mortgage or a deed
of trust. As previously mentioned, the signatures of both the husband and wife are required to sell, transfer, or
otherwise convey or encumber the community property.

While a probate is typically required to dispose of the community property in the event of the death of either
spouse, in certain fact situations a limited probate proceeding has been authorized by existing law. This limited

probate proceeding is commonly known as a community property or small estate “set-aside”. For example, the
court may find that the entire estate of the deceased spouse is property passing to the surviving spouse. In such
event, the court may determine that no administration of the estate is required. See Probate Code Section 6600
et seq. and Section 13656.